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Thursday, January 26, 2006

Kirchner Fighting Inflation by Freezing Prices

Argentina's President Kirchner has been on the inflation warpath recently, trying to freeze prices of as many products as he can. Yesterday it was announced that he came to an agreement to freeze prices on some products with two prominent U.S. companies -- Kimberly-Clark, which makes diapers, facial tissue, and other paper products, and Proctor & Gamble, the largest consumer products company. This is in addition to the price agreements he already secured with ranchers, farmers, and supermarket owners.

Last month the annual inflation rate reached a 31-month high of 12.3%, so it is clear Kirchner has some work to do. It remains to be seen whether his war on prices will have any effect (so far it seems it hasn't). Previously, inflation was the scourge of Argentina for many decades. It disappeared for a decade in the 1990s after the peso was linked 1-to-1 with the dollar.

Kirchner has said that he worries about inflation so much that it "keeps him awake at night." Already I can see some of the beginning effects -- more and more property owners are asking for rent to be paid in dollars rather than pesos.

For the sake of the economy, which has just begun to really recover after the 2001/2002 crisis, let's hope Kirchner and the government can get this problem under control. As popular as Kirchner is right now, he could find himself in a very bad position if there is runaway inflation by the time the election rolls around.

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2 Comments:

Blogger Patricia Bates said...

We are all hoping for the best in Argentina.

I like your blog and the information you share about Argentina. Congratulations!

1/27/2006 10:36:00 AM  
Blogger johnny said...

This is an FYI post with nothing to do with Kirchner and inflation. Following advise from multiple sources I rented a cellphone from Phonerental, a local company. No problems until last night and today. Last night a swift bicyclist ripped the phone right off my belt. Bad enough you say. Today Phonerental pointed out in the fine print that I owed them half of the replacement costs of the phone( plus taxes on that amount-25%). A very hefty sum ! Don't lose your cellphone if you are contracted with Phonerental !!

1/27/2006 12:05:00 PM  

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